One of real estate’s best assets is generating passive income. But are real estate investments really fool-proof? Sam Wilson welcomes real estate investor and best-selling author of Backstage Guide To Real Estate, Matt Picheny, to discuss ways on how to maximize what you get out of investing your time, money, and effort in real estate. In this episode, Matt shares his insider’s knowledge in developing passive real estate income streams that allow you to spend your time and energy on the pursuits of your choice. Learn more as Matt takes us in on some tips on how to make informed decisions when investing, and how to put your money to work.
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Matt Picheny On Passive Income: A Backstage Guide To Real Estate
Matt Picheny is focused on developing passive income streams for investors so they can choose how they want to spend their time. He has invested in over 8,000 apartments nationwide. He’s a licensed real estate agent and a Fannie Mae and Freddie Mac-approved buyer. He has earned both the Commercial Real Estate and Real Estate Finance certificates from Boston University. Matt and his wife also have won two Tony Awards as Co-Producers of the Broadway shows, Moulin Rouge! and American Utopia. Matt, you have been everywhere. This is wild. I’m super excited to have you on the show. Thanks for coming on.
Thanks, Sam. I’m super excited to be here.
The pleasure is mine. There are three questions I ask every guest who comes into the show. Can you quickly tell us where did you start, where are you now and how did you get there?
It all started for me back in 2001. If you remember, the dot-com bubble had burst. I was working in digital marketing at the time. All my clients were going out of business or not spending money on digital marketing projects. My business was imploding and right at that time, the landlord or the person for my primary residence came up to me and said, “I need you to move out. You got 90 days.” That was quite a rude awakening. In 90 days, I managed to get a job because my business was not viable at the moment and I went in-house at Showtime. It was a cable channel. They were a client of mine.
Instead of renting, which I had been doing in New York, I compromised a little bit on the location but was able to buy something. Years later, I sold that property and quadrupled my equity in the deal. The lightbulb went off, “Real estate is where I’ve got to be.” That’s what started me on the path where there was a primary residence. That wasn’t my first investment, but it got me on the path of, “I need to explore this real estate investment thing because this is immensely powerful.”
That’s always the lightbulb moment or at least for a lot of people it is. You weren’t looking for it, but it hits you across the head and you go, “There’s something here. I can keep working on this.” You’re up to 8,000-something units across the country. Tell us about that. How have you grown that side of your business?
For me, it went from that single-family home to buying an investment property that became a rental. It was a vacation home and then it went into single-family and some fix and flips. I was doing real estate as a hobby for about ten years, but I wanted to change this to full-time and scale. I found that would work best for me and what I wanted to do through utilizing syndication, which I’m sure a lot of your readers know about. It’s where a bunch of investors pool their resources together, capital experiences, and balance sheets and can go after these otherwise unobtainable assets.
That’s where I started getting involved in multifamily. In my portfolio of a little over 8,000 units, I’m a limited partner in 2/3 of those deals. I invest passively in those deals. The other 1/3, which is getting close to 2,400 units, are deals that I am a general partner on. When I’m a general partner, I’m also the asset manager. I’m actively involved in the day-to-day operations of those properties.
How do you fit in co-producing two Broadway shows right in the middle of a real estate career?
I moved to New York City to pursue a career in theater. For five years, I was a performer. I performed in shows all across the country. I was in fifteen professional productions. Fast forward many years, I met my wife through an online dating website, not through theater. It turns out she works in theater. That’s her [9:00] to [5:00] job. She works on the business end of theater doing the production-type work, not a performer.
The arts can bring light to certain subjects that aren’t being highlighted and can be a force of positive change in society.
The two of us have been able to use our passion in theater and, on the side, co-produce shows. We do that once in a while, not all the time. We have invested in some shows that have lost money. We invested in Hamilton, which was a huge hit. My wife and I co-produced Moulin Rouge! and American Utopia. I’m happy to say that we won two Tony Awards, which was awesome. It’s quite nice to get that pat on the back and appreciation from the theater community that our shows are ones that they thought had merit.
I love it when someone isn’t boxed in. There are a lot of times when it’s like, “This what I do. I’m an apartment syndicator.” It’s rigid, but when there’s that surprise of like, “Not only am I an apartment syndicator, but I’m also producing Broadway shows,” that’s fantastic. How do you tie the arts and your investments together?
For me, theater has always been a passion of mine. There’s an interesting tie-in with the business that I do now. Going back to the story where I had 90 days to get out, this was right after the ‘90s. I was very much a fan of the musical Rent, and Rent has a story. I had auditioned for it many times and got some callbacks but never was cast in the show, though. In the story of Rent, there’s an antagonist. In the show, the bad guy is a guy named Benny. Benny ends up marrying this rich woman, buying this building where his friends live, and demanding that they pay him the back rent or get kicked out. He’s going to bulldoze it and make condos. He’s an evil guy.
Back then is when I started thinking about it. This was when I bought my first apartment. I talk about this in the book I wrote that came out. For me, it was a moment of, “Do landlords have to be evil? Can landlords be a force of good?” What I’m trying to do from that ‘90s idealism from Rent, the seed that was planted a long time ago, is, “Can property ownership be a positive for communities?” I work hard on making things positive in my business and my life. One of the ways that I can do that is by giving back to communities through either making apartments better or through charitable donations and work in that area.
I was involved when I was living in Boston. We moved back to New York City. In Boston, I was involved in an organization called Caritas, which is working to end homelessness. They provide not temporary housing but permanent housing for homeless people. It’s a fantastic organization. I’m looking for something in New York that does something similar. Also, through the arts. The arts can be a form of social change, bring light to certain subjects that maybe aren’t being highlighted, and be a force of positive change in society.
Look at the shows that we have been involved in and talk about a show like American Utopia, which is David Byrne, the lead singer from Talking Heads. It’s him on stage and talking about how he sees the world, different ways to interact with one another and connect as humans, and also some injustices. He has a big thrust of the show at a certain point. He’s talking about voting and specifically voting in the midterm elections because the midterm elections get overlooked a lot. If you don’t or do like what’s going on in the country, you need to vote and make your voice heard so that you have a say. Voting is super important. If I can be involved in art, which I love, that also has a social message behind it to one extent or another, then that’s a win for me.
One of the other things that came across to me was that you like to revitalize and elevate communities. What other ways have you put feet and hands to that idea?
One of the questions that we look at when we look at one of the apartment communities that we’re purchasing is, “What can we do to elevate this property and make it better?” A lot of times, we’re purchasing properties that have been neglected. The low-hanging fruit is deferred maintenance. We will go ahead, cure that, and look at things that we can do to make it environmentally friendly. Making something environmentally friendly at a property, whether you’re doing a water conservation program, energy, or things of that nature, helps three people.
It helps the tenants because most of the properties that we’re purchasing are not all bills paid. The bills are paid by the tenants. It lowers their utility costs, which they love. Number two, it’s good for us. It lowers our utility costs for the common charges. Many times, depending on the loan that we’re doing, we can get a loan. Fannie Mae has a Green program, so we can get a reduction in our interest rate.
Thirdly, it’s great for the environment. It’s the things that I’m doing that I talked about before and even that. It’s not a charity. I’m not curing cancer or saving the entire planet in one fell swoop. I can make the world a little bit better than the way that I found it for all of those people involved and everybody who touches a project. We treat our staff well. Even during COVID, we did a lot of things that were great to help the communities and the staff. I can make a nice profit. I have great returns for my investors. They love it. We’re doing good in the world. It’s got a nice feel-good component to it as well.
If you don’t like what’s going on in the country, or even if you do, you need to vote and make your voice be heard.
Talk to us about some times or a situation in which you found yourself either facing failure or a significant hardship in business, the arts, real estate investing, or something else along with your career. Tell us about a time when you face something challenging. How did you overcome it?
There was that opportunity back in 2001 when I had to figure out my entire life again. Another challenging moment for me was when we moved from New York to Miami. My wife got a call completely out of the blue for an amazing job opportunity, but it was in Miami, Florida. It was too good for us to pass up. We moved down to Miami, which was a challenge all on its own. Once we got down there, I needed to figure out what I was going to do. I assumed I was going to move to Miami and I’d be able to find some job working in the digital marketing world, which I had done for years in New York. I have been successful.
I got recruited out of one company and pulled into another. I don’t think I ever looked for a job. There was a need in New York for that and large projects in Miami. I got down there and started talking to the different agencies down there. There were 5 or 10 people in the agency, and I managed teams of 50 to 100 people. It was on a different scale and the salaries weren’t great. At that time, I was listening to Robert Kiyosaki’s Rich Dad Poor Dad and the Hamilton cast recording. I was listening to both at the same time. It’s not simultaneous, but I would bounce back and forth.
I was in a position where I was going out on these job interviews. I didn’t like them. I wasn’t even getting that many offers. When I got an offer, it was not very much money. I’m in a completely new place, I didn’t know what was going on, and quite honestly, I was burned out. I had done that agency life with long hours and sometimes all-nighters when we’re pitching new business. I was like, “What am I doing?” I’m listening to Kiyosaki talk about developing multiple streams of passive income and to the Hamilton cast say, “Do not throw away your shot.” I’m listening to that song called My Shot.
I’m like, “I’m going to do it and take my shot. I don’t want to do this anymore. I want to do real estate and try to make this full-time.” I took what could have been seen as a dark moment where things seemed lost and I spoke with my wife about it. Honestly, things were a little tight from a financial perspective those first few years. Luckily, we had some passive investments from the house. We had a townhouse that we had bought in Brooklyn, so we were renting that out. That was cashflowing. We had some passive income coming from that and Hamilton. We weren’t destitute. I don’t want to paint that picture, but it was tight. It took several years to get the business going.
That’s good for you for having the fortitude to go, “This not what I want to do again.” A lot of people get stuck in that. Even though it’s not great, they go ahead and take it because it’s known. You said, “We’re going to the path that isn’t so clearly well-marked, yet it sits right in my soul.” What were some challenges or even some successes you had starting in the multifamily space, especially as it pertains to the capital raise side?
I had some challenges getting into the multifamily space from a sponsorship perspective. I wanted to sponsor a deal, but I began by investing as a limited partner. I thought I would do the two in parallel. What ended up happening was it took me two years to find my first deal to be a general partner on. I had invested as a limited partner in five deals prior to that, which was great. I got a lot of experience through the osmosis of being an investor in things but not the same experience that you get from doing a deal hands-on. It was challenging.
I started in a couple of markets before I found the market where I ended up finding a property. I was looking in Ohio because that’s where I had flipped some houses. I was looking in Florida because I was living in Miami at the time. My wife got another call out of the blue. We moved to Boston, but I have been looking in Florida. I was living in South Florida. I grew up in Orlando and my parents still lived there at the time. I was searching in Central Florida, Tampa, Daytona, and Orlando. I put in some offers but wasn’t finding a deal.
I ended up ultimately getting a deal in Kansas. I started looking in the Kansas City market, which raises some eyebrows like, “Why did you pick Kansas City?” I had spent a summer there a long time ago and enjoyed it. I had done a show back in my theater days and had a good friend who moved there. There was a little comfort level there going. At least I get to hang out with my old college roommate, his wife, who went to college with us, and their daughter on that first trip and meet with brokers and property managers. Deals started looking like they would pencil out.
Truth be told, at this point, we’re about to sign up a contract to sell the last syndicated property that we have in Kansas City because prices have gone through the roof. I don’t know why. It’s a good market, but it has gone berserk. Our investors are happy and we have been exiting a lot of those deals. That was a challenge in those first two years trying to find the market I liked and make inroads with those brokers and property managers. You have to develop those relationships so they feel comfortable knowing that you can close on a deal.
Make sure you’re setting up relationships with people that share the same values.
The first deal I did was 132 units. It was almost $10 million. It was a $9.9 million purchase price. For a broker to feel comfortable that some guy that they don’t know from out of town is coming in and says that he can buy this property, it’s like, “Can he come to the closing table?” Once I could do that and showed that I could perform in that market, the doors started to open up. They didn’t open wide and there wasn’t a huge celebration, but they started to crack open. Time after time of delivering on my promises, the doors opened a little wider each time.
Matt, this has been fun. I learned a ton from you and loved hearing your story. You certainly have not disappointed me in all the fun and amazing things you have done, especially the ability to pivot. People want to get started in real estate and scale. The name of this show is How to Scale. They’re doing single-family, “How do I crack that nut and go to something a little bit bigger? What does that look like?” You have given some clues on how to do that. Thanks for doing that. Let’s jump here into the final four questions. The first one is this. What is one tool or resource you find you can’t live without?
My family. That gives me the energy and the juice to keep going.
Question number two. If you could help our readers avoid one mistake in real estate, what would it be and how would you avoid it?
It’s all about relationships. In the way of looking at how to avoid it, make sure you’re setting up relationships with people that share your same values, you’re aligned from a value perspective, and you have done a little research and background checking on them. Luckily, I haven’t had any bad experiences with my partners, but I do know people who have. You have to be careful.
When it comes to investing in the world, what’s one thing you’re doing to make the world a better place?
Getting involved in organizations that are doing positive work in a community is important, whether that’s involvement in the arts, homelessness, or food scarcity. That’s important. It’s elevating the world, especially if it’s a community in which you invest. If you could make that area better, it would make your property worth more. It’s a win-win for everybody.
If readers want to get in touch with you or learn more about the book you have coming out, what’s the best way to do that?
Go to Picheny.com. My book Backstage Guide to Real Estate is out on pre-order. If you order it before the release date of February 9th, 2022, it’s at a major discount. Get it if you can beforehand, but it’s still reasonably priced after. I also have a newsletter on there that sends out free tips and advice. I’ve got a blog, videos, and everything.
Matt, thank you so much for your time. I do appreciate it.
It’s my pleasure, Sam. Thanks for having me on your show.
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About Matt Picheny
Matt Picheny is focused on developing passive income streams for investors so they can choose how they want to spend their time. He specializes in revitalizing and elevating communities through real estate investment, community enrichment, climate sensitivity, and the arts. Matt has over 15 years of experience in property analysis, financing, acquisition, construction, operations, and has invested in over 8,000 apartments nationwide. He is a licensed real estate agent, a Fannie Mae & Freddie Mac approved buyer and has earned both Commercial Real Estate & Real Estate Finance certificates from Boston University.
Matt is a member of the Forbes Real Estate Council, the Fast Company Executive Board, and is an advisor to a PropTech company. A PMI certified Project Management Professional, Matt is a digital marketing veteran whose 18-year career in the advertising world included working for some of the world’s largest advertising agencies, producing award-winning projects for Fortune 500 clients including Verizon, IBM, and Coca-Cola.
Matt and his wife have two Tony Awards® as co-Producers of the Broadway show Moulin Rouge! and American Utopia. They have invested in many other theatrical productions including the iconic musicals Hamilton and Wicked. A native of Orlando Florida, and a former actor, Matt still believes in happily ever after. He lives with his wife and their two daughters in Brooklyn, New York, and in his downtime enjoys long walks on the beach, Broadway, Rock and Roll, and an amazing barbecue.
